Across every sector, outsourcing continues to grow. Not just peripheral activities either, but core processes as well. Effective management of the outsourced environment is becoming an absolutely critical capability for any enterprise.
The basics are largely in place, although there is some way to go. Tony Rawlinson, Managing Director at Equaterra wrote recently that – even in financial services, where regulatory oversight on outsourcing management has been far more intrusive than elsewhere – many firms judge their own governance capabilities as being ‘weak’. He continues:
“In part this is due to ineffective governance design and accountabilities, but mainly it is attributable to inadequate processes, tools and capabilities which allow part of the value of outsourcing deals to leak away.”
He’s right. Too often,the processes, tools and capabilities required are under-estimated so that even basic governance is inadequate and inefficient.
Anyway, even if an organization has the basics in place, that’s surely just the start. It’s vital to retain the ability to migrate outsourced services back in-house if necessary: but, let’s face it, that’s an unlikely scenario.
The business-as-usual reality is that there will be continual incremental change. Activities will expand or contract in response to business requirements. Activities will be shifted offshore and between different facilities. The footprint of activities delivered by service providers will shrink or grow according to their performance. Outsourcing providers may have contractual obligations to propose innovation within their own domain. And there will be ongoing systems upgrades and other IT-driven change.
But, beyond and in addition to all of that, the organization will want to drive continual improvement. It will want to orchestrate continuous excellence across every aspect of its operations.
My experience with clients suggests that there are three essential pillars required to support continuous excellence across the outsourced environment:
One Shared Truth: shared visibility of the end-to-end business processes, within an integrated model of the enterprise.
Stakeholder Adoption: a shared rich what-if analytical framework where stakeholders evaluate potential improvements, within a robust but practical governance framework where ownership and accountability are clear.
Synchronicity: the theoretical view of the business must always be in step with the operational reality. The best way to achieve this is to publish the theoretical view as a personalised ‘intelligent operations manual’. This provides end users with valuable task support for their day-to-day role, reinforces process as the language of the enterprise, and fosters universal participation in performance improvement.
I hesitate to appear dogmatic, and you might want to label them differently, but I don’t see how any organization could be successful in delivering sustained continuous improvement across an outsourced environment without these three essential foundations…